Self-employment can be exciting, and can give you a lot more freedom than the traditional workplace. However, self-employed people often find they do well to make some changes to their savings habits. In particular, you should considered:
So up until now, you’ve always diligently and regularly tucked your savings away in ISAs or fixed term accounts. It’s not the most accessible way to keep them, but they’re savings – not regular spending money. You’ve happily sacrificed accessibility for easy access.
In just about every other circumstance, you should be patting yourself on the back. If you’re just starting out self-employed, then unless you’re one of those lucky people who’s launched into it with a customer base in place before quitting the day job you’ve probably realised your savings might have to help prop you up while you get off the ground. Even when your business is running along comfortably, however, you might well have the odd slow trading period from time to time. It’s best to keep a portion of your savings in an accessible account on an ongoing basis so that the healthy profits from “feast” periods can be used to see you through the “famine” periods. You might well want to consider a high interest current account, which will let you keep money not just in an accessible savings account but in your current account while still getting competitive interest rates.
Retirement savings – most commonly pensions – are also a form of saving. People tend to forget that, because it means losing access to the money you put in until retirement and because usually an occupational pension comes out of your paychecque automatically so that you don’t even have to think about making these kinds of savings too much.
However, one of the disadvantages to going self-employed is that you have lost the benefits of workplace pension schemes. If you want your retirement savings to be up to scratch down the line, then once your business is off the ground you will probably want to start making contributions to a private pension scheme instead. You should be able to transfer the pension pot you have built up through workplace schemes so far into a private plan. You will unfortunately lose the benefit of employer contributions, but you will get tax relief meaning your pension pot will be topped up somewhat by the taxman over and above the money you put in out of your own pocket.